Bancolombia approaches the world of cryptocurrencies: with what is it experimenting?
The classic institutions in the world of finance continue to experiment with cryptocurrency technology in search of new value propositions. Grayscale Investments’ latest report, “Reimagining the Future of Finance,” describes the digital economy as “the intersection of technology and finance that is increasingly defined by digital spaces, experiences, and transactions.” It is in this framework that players in the economy such as banks are beginning to interact with emerging technologies such as cryptocurrencies.
One of them is Bancolombia, the traditional Colombian bank, which through different alliances is testing possible use cases with cryptocurrencies. Along with other entities, fintechs, and exchange platforms, the bank participates in a sandbox (a safe space for testing) regulated for experimentation, with the purchase and sale of cryptocurrencies such as Bitcoin, Ether, Bitcoin Cash, and Litecoin.
What Bancolombia Aims At
Cipriano López, Bancolombia’s vice president of innovation, believes that “cryptocurrencies as a means of payment -and even as legal tender- will be increasingly common in our region.” This workspace, according to the Financial Superintendence of Colombia, “generates a joint learning space between the digital ecosystem and the national government that contributes to deepening knowledge about crypto assets, the technologies used in the pilot tests, and the application of regulations in an environment of financial innovation”.
The bank is working on this implementation together with Gemini, the exchange created by the Winklevoss brothers, and today they have just over 600 clients. The service in question allows these users to buy cryptocurrencies directly from the Gemini exchange using the bank’s instruments (for example, savings banks or current accounts) and the process takes place through Bancolombia’s digital channels. “This pilot seeks to help understand the behavior of people who invest in this type of asset, as well as how to operate correctly between banks and exchanges,” said the institution’s executive. Bancolombia, however, is not the only one: Banco de Bogotá and the fintech Movii also participate in the experiment.
Results until now
The financial results so far show more than 1,600 million Colombian pesos (just over USD 400,000) in approximately 6 months of operations. In this sense, the Colombian crypto pilot also set itself the goal of measuring the effectiveness of digital identity verification and money traceability. In fact, the National Tax and Customs Directorate (DIAN) has already confirmed that it will control the operations associated with cryptocurrencies in Colombia, which could imply that exchange users declare these movements.
Beyond Colombia: LATAM
This initiative is part of the general process of different banks approaching the crypto world. Central banks in Peru, Chile, the Caribbean, and Mexico are getting closer to effectively implementing central bank digital currencies, better known as CBDCs (Central Bank Digital Currency). This type of project aims not only to facilitate international transfers but also to attack financial segments such as loans. According to CoinGecko, this market has a global value of more than USD 2,000 million.
The potential use cases consist of international payments and transfers, as well as credits.
Financial institutions in LATAM, which operate under regulation, are looking for ways to participate in this market, globally valued by CoinGecko at more than US$2 billion, beyond investments in volatile currencies such as Bitcoin.
According to Cynthia Del Pozo, director of strategy and corporate development at Gemini, “programs such as the one that the Superintendence has established in Colombia are an important step for the evolution of the crypto ecosystem in Latin America.”
By Audy Castaneda
